Canada’s unemployment rate falls to the lowest level in November 2018

Summary

• Economy adds 89,900 in November beating forecasts by a substantial margin
• Unemployment rate falls to the lowest level since the record-keeping began in the 70s
• Wage growth fell for the sixth consecutive month despite the solid data
• Job gains were driven by full-time jobs in the private sector
• BoC still unlikely to move with a rate hike in January 2019

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The latest labor market data from Canada showed a solid reading in the labor market, marking one of the best reports on the labor data since record keeping began.

Data released on Friday by Statistics Canada showed that the economy added a record number of jobs while the unemployment rate fell to the lowest levels. The data underlined the fact that it could ease the Bank of Canada’s concerns on a slowdown in the economy.

Official data showed that the Canadian economy reported a net gain of 94,100 jobs during November. The gains came mostly on full-time hiring, and it also beat estimates which forecast an increase of 11,000 jobs during the month.

The job gains came as full-time hiring surged to 89,900. The gains came mostly from the private sector. Part-time hiring rose by 4,100 during the reported month.

The increase in the jobs showed a growth of 0.5% on a month over month basis. This was the most significant monthly increase. On a year over year basis, job growth in November showed a 1.2% jump.

Canada’s six month average for employment gains also increased from 16,900 to 33,800.

Despite the solid headline numbers, data such as wages showed a different picture. On a year over year basis, wages for permanent workers fell for the sixth consecutive month. Wage growth was seen rising to 1.5% on an annualized basis in November. The wage growth data was seen edging closer to the lowest levels of 1.2% which was registered in July 2017.

Meanwhile, the unemployment rate fell to 5.6% which was the lowest since Statistics Canada started to keep records since the mid-1970s. The solid jobs report is expected to provide relief to the Bank of Canada officials.

Earlier in the week, the BoC governor Poloz expressed concerns on disappointing data on the economy in the past month. The Bank of Canada had kept interest rates unchanged at its monetary policy meeting last Wednesday. The Central Bank signaled that rate hikes would be data dependent.

Despite the solid report on the jobs, many economists believe that job growth could start to cool in the coming months. There is also speculation that despite a solid report, the Bank of Canada will hesitate to hike interest rates in January next year.

Last week, the probability of rate hikes drifted lower after a weaker GDP print a slightly dovish statement from the BoC. Despite the uptick in the labor market, the likelihood of a January rate hike edged higher to 23.89%, up from 12.39% previously.

Following the jobs report, the Canadian Dollar managed to post a rebound. This came just after the Canadian Dollar fell when the BoC announced that it would keep interest rates steady.

The Central Bank also flagged other aspects such as weaker oil prices which were impacting the export sector. Crude oil prices have been in a steady decline.

Given the uptick in the jobs report, expectations are starting to build that the next policy move from the Central Bank will no doubt be a rate hike. However, questions remain on when the next rate hike could come with January probability falling already.